US housing activity shows signs of stabilization

The Daily Shot: 31-Jan-23
The United States
Canada
The Eurozone
Japan
Asia – Pacific
China
Emerging Markets
Cryptocurrency
Energy
Equities
Credit
Rates
Food for Thought



 

The United States

1. Let’s begin with the housing market.
 
While still at multi-year lows, pending home sales were firmer than expected in December.
 

 

 
Mortgage activity points to further improvements this month.
 
Source: Pantheon Macroeconomics  
 
New home sales jumped last month.
 

 
This chart shows new houses sold by stage of construction.
 
Source: Chart and data provided by Macrobond  
 
Inventories, measured in months of supply, eased.
 

 
Much of the new-home inventory is still under construction.
 
Source: Calculated Risk  
 
Below is the median price of new homes sold.
 
Source: Chart and data provided by Macrobond  
 
And this chart shows the distribution of prices over time.
 
Source: Calculated Risk  
 
Where do large investors buy houses?
 
Source: @wealth   Read full article  

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2. The Dallas Fed’s manufacturing index showed some improvement this month.
 

 
Hiring picked up.
 

 
Wage pressures are easing.
 

 
Factories expect slower price gains ahead.
 

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3. The Fed may adopt a more hawkish tone than expected this week amid easing financial conditions.
 
Source: Barclays Research  
 
The market has been betting against the dot plot.
 
Source: Alpine Macro  
 
This chart shows the lag between the Fed’s last hike and first cut.
 
Source: Payden & Rygel  
 
Here are some scenarios for the FOMC decision this week and potential market reactions (from ING).
 
Source: ING  

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4. Auto loan delinquencies have been rising.
 
Source: @cfb_18, @wealth   Read full article  


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Canada

1. The yield curve remains deeply inverted.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  
 
2. The market expects the next BoC move to be a rate cut.
 
Source: @ANZ_Research  
 
3. Supply bottlenecks and, to a lesser extent, labor shortages have been easing.
 
Source: Hugo Ste-Marie, Portfolio & Quantitative Strategy Global Equity Research, Scotia Capital  


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The Eurozone

1. Spain’s inflation unexpectedly jumped this month.
 

 
Source: @alonsosotoj, @alicegledhill1, @economics   Read full article  
 
The nation’s core inflation continues to surge.
 

 
Spain’s retail sales were robust in December.
 

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2. Germany’s GDP unexpectedly declined last quarter.
 

 
Source: Reuters   Read full article  
 
New business loans in Germany tumbled last month.
 

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3. Euro-area sentiment indicators improved this month. This index combines services, industrial, and consumer confidence.
 

 
This scatterplot shows consumer sentiment vs. the composite PMI.
 
Source: @ANZ_Research  
 
The Citi Economic Surprise Index continues to trend higher.
 

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4. The market expects the ECB to deliver a 50 bps rate hike.
 

 
The terminal rate has risen over the past few days.
 

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5. The US-Germany 10yr bond spread has been tightening.
 


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Japan

1. Employment indicators held steady last month.
 

 
2. Manufacturing output edged lower but exceeded forecasts.
 

 
3. This chart shows Japan’s nominal retail sales.
 


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Asia – Pacific

1. South Korea’s factory output has been tumbling.
 

 
Source: RTT News   Read full article  
 
Here is South Korea’s cyclical leading index.
 

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2. Australian retail sales were down sharply in December.
 

 
Source: @Swatisays, @markets   Read full article  
 
Credit growth has been slowing.
 


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China

1. PMI indicators showed a rebound in business activity as the economy reopened.
 
Source: Reuters   Read full article  
 
Manufacturing:
 

 
Nonmanufacturing:
 

 
Employment indicators bounced.
 

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2. The Shanghai Shenzhen CSI 300 Index remains in the uptrend channel.
 
Source: @TheTerminal, Bloomberg Finance L.P.  
 
3. Consumers are opening their wallets (2 charts).
 
Source: @ANZ_Research  
 
Source: Capital Economics  


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Emerging Markets

1. Will the UAE investment in Adani stabilize share prices?
 
Source: NDTV   Read full article  
 

 
Many of the conglomerate’s bonds have taken a hit in recent days.
 

 
Indian stocks are broadly overvalued and vulnerable.
 
Source: Gavekal Research  
 
India’s business activity has been outperforming.
 
Source: BCA Research  

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2. Turkey’s economic confidence index has been rebounding.
 

 
3. Brazil’s debt-to-GDP ratio has been grinding higher.
 

 
4. When will Banxico begin cutting rates?
 
Source: Oxford Economics  
 
5. Liquidity conditions favor EM economies over DM.
 
Source: Numera Analytics (@NumeraAnalytics)  
 
6. This chart shows the trade balance across EM economies.
 
Source: @SergiLanauIIF  


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Cryptocurrency

1. Last week, crypto funds saw the largest amount of inflows since July 2022.
 
Source: CoinShares   Read full article  
 
Long-bitcoin funds accounted for most inflows last week, while multi-asset funds continued to see outflows.
 
Source: CoinShares   Read full article  

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2. So far, over $495 million in short BTC futures contracts have been liquidated this year.
 
Source: Glassnode   Read full article  
 
3. Bitcoin traders shied away from leverage during the latest rally, possibly leaving the spot market as a key driver of current price dynamics.
 
Source: Glassnode   Read full article  


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Energy

1. Money managers continue to boost their bets on oil and refined products.
 
Source: @JKempEnergy  
 
2. Where is Russian crude oil going?
 
Source: Longview Economics  
 
3. US natural gas proved reserves are massive.
 
Source: @EIAgov  


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Equities

1. The S&P 500 held resistance at 4100.
 

 
2. Analysts continue to downgrade their forecasts for this year’s earnings.
 
Source: Yardeni Research  
 
Recent gains have been driven by multiple expansion, …
 
Source: Truist Advisory Services  
 
… boosted by easing in fund outflows.
 
Source: Truist Advisory Services  
 
But there is only so far that multiples can expand. Falling earnings limit the upside for stocks.
 
Source: Truist Advisory Services  
 
And if we get a recession, there is plenty of room for earnings to fall.
 
Source: Alpine Macro  

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3. Earnings misses have been resulting in outperformance so far. Too much enthusiasm?
 
Source: Goldman Sachs; @GavinSBaker  
 
4. Small- and mid-cap futures positioning remains bearish.
 
Source: Deutsche Bank Research  
 
5. The S&P 500 equal-weight consumer discretionary/consumer staples price ratio broke out of an eight-month range, signaling risk-on conditions.
 
Source: @DanRusso_CMT  
 
6. Typically, the underperformance of US bank stocks relative to WTI crude oil is associated with structural economic weakness (energy-price-induced recessions), according to Gavekal. (2 charts)
 
Source: Gavekal Research  
 
Source: Gavekal Research  

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7. The SPDR Technology Sector ETF (XLK) is testing resistance versus the S&P 500.
 

 
8. Companies with significant revenue exposure to the federal government have been underperforming recently.
 
h/t Goldman Sachs  
 
9. The ARK Innovation ETF has been following the dot-com analog.
 
Source: @TheTerminal, Bloomberg Finance L.P., h/t @t1alpha  


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Credit

1. The iShares Investment Grade Corporate Bond ETF (LQD) is testing initial resistance.
 

 
The iShares Interest Rate Hedged Corporate Bond ETF (LQDH) is also testing resistance as upside momentum slows.
 

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2. The US corporate bond market appears overvalued relative to Treasuries.
 
Source: Gavekal Research  
 
3. US investment-grade credit could soon yield less than fed funds for the first time in about 35 years.
 
Source: Deutsche Bank Research  
 
4. US jobless claims don’t signal higher credit spreads for now.
 
Source: @johnauthers, @opinion   Read full article  


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Rates

1. Fed funds lending/borrowing among banks has risen recently, which should make the monetary policy more impactful.
 
Source: @markets   Read full article  
 
2. Money market funds and foreign banks are taking advantage of the Fed’s RRP program, which now pays 4.3% on secured overnight deposits.
 
Source: Capital Economics  
 
3. Will the Fed initiate outright MBS sales amid extremely slow amortization rates (due to collapsed refi activity)?
 
Source: PGM Global  
 
4. Treasury futures positioning is extraordinarily bearish.
 
Source: Deutsche Bank Research  


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Food for Thought

1. Tech layoffs by sector:
 
Source: Scotiabank Economics  
 
2. Reasons for searching for a new job:
 
Source: @CivicScience  
 
3. Nonsupervisory employees’ wages as a share of average wage:
 
Source: @WSJ   Read full article  
 
4. Microsoft Bing’s ad revenue:
 
Source: @chartrdaily  
 
5. 2024 Republican presidential nomination probabilities in the betting markets:
 
Source: @PredictIt  
 
6. Share of the global population living in a democracy:
 
Source: Statista  
 
7. Are you sticking to your New Year’s resolutions?
 
Source: @CivicScience   Read full article  
 

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